Asian petchem markets take a breather ahead of Lunar New Year

SINGAPORE (ICIS)–Asia’s petrochemical markets have slowed down ahead of the Lunar New Year holiday as manufacturing activity dwindles, limiting trade activity in the region.

Market players typically hold off purchasing fresh spot cargoes as the holiday draws near, with regional factories also lowering their production levels.

The Lunar New Year, which falls on 25 January, is celebrated in most parts of southeast and northeast Asia with the holiday period ranging from two days to a full week.

China will be on holiday on 24-30 January for the Lunar New Year and Spring Festival.

In key petrochemical feedstock markets, spot prices have been stable to higher since the start of the year amid fresh optimism that the headwinds affecting global economic growth have begun to weaken.

The long-awaited US-China Phase One trade deal was finally signed on 15 January by US President Donald Trump and Chinese Vice Premier Liu He. The deal reduces the uncertainties for global trade but is unlikely to lead to a strong rebound in growth, particularly for China, since the bulk of the tariffs remain in place.

“The Phase One deal pauses but does not end the US-China trade war, and leaves the effective US tariff rate on Chinese imports far higher than two years ago,” Fitch Ratings said in a note.

“Moreover, such a sharp increase in imports from the US could directly affect Chinese GDP through lower net exports, depending on how much is offset by higher demand or by lower imports from elsewhere,” it added.

Ethylene prices in northeast Asia have risen due to restocking activity in China and widespread production cuts at naphtha-LPG crackers because of weak margins.

Buyers raised their price indications to $820-830/tonne CFR (cost & freight) NE (northeast) Asia for February delivery, against selling indications at around $850/tonne CFR NE Asia.

Meanwhile, trading activity in the monoethylene glycol (MEG) and diethylene glycol (DEG) markets have dwindled amid slowing demand due to closures of some downstream units.

In the downstream polyester market, meanwhile, demand has faltered as textile converters gradually shut their units from 15 January onward as workers have to return home for family reunions.

In the polyethylene (PE) pipe grade market, downstream pipe converters have started to slow down operating rates and will eventually stop production in the coming week.

Restart plans is to slowly turn up operating rates in early February and producers expect to only resume normal production closer to end-February, pending further downstream demand.

Some Vietnamese converters will also slow down or stop operations over the Lunar New Year holiday.

The overall lower operating rates and restricted logistics will reduce the spot demand for PE pipe grade for January and February.

In the propylene market, spot prices have been climbing on snug supply, with downstream markets unable to match the uptrend.  This forced several downstream players to shelve their purchases until after the Lunar New Year holidays.

In the polyethylene terephthalate (PET) market, Chinese players said that they will still be ready for discussions if there are firm buying interest.

Current PET inventories in China are manageable amid overall reduced operating rates since the fourth quarter of last year.

In the maleic anhydride (MA) market, buying interest in southeast Asia has fizzled out as the Lunar New Year market closure draws nearer.

Buyers can afford to wait as “downstream production could slow down too during the holidays”, a market player said. Offers held steady on strong upstream cost pressures.

In the polycarbonate (PC) market, demand has fizzled out with muted trade activity expected ahead of the holidays.

Market participants who have fulfilled spot requirements for January spot shipments shied away from imports, even as some suppliers eyed firmer levels for February material.

For the polyvinyl chloride (PVC) and vinyl chloride monomer (VCM) spot markets, sentiment has been generally positive as buyers secured February-lifting cargoes amid tight supply ahead of the holiday.

Demand is expected to improve further post holidays, while supply may remain snug amid shortages for feedstock vinyl chloride monomer (VCM).

Asia’s polystyrene (PS) sentiment has been buoyant on the back of strong downstream demand and snug spot supply.

Sentiment in the PS market continue to be underpinned by active restocking since end- December, as end-users from the appliance and packaging sectors continued to pick up cargoes.

In the acetone market, momentum has slowed down, following spot transactions for some 6,000 tonnes of Asia-origin cargoes in the first two weeks of January.

Post-holiday projections were largely positive on the back of tightened supply from the scheduled turnarounds during that period, amid restocking activities.

Focus article by Nurluqman Suratman

Photo: Lanterns hung on a tree ahead of the Chinese Lunar New Year celebrations in Beijing. (By Ng Han Guan/AP/Shutterstock)

With additional reporting by Yeow Pei Lin, Joson Ng, Hazel Goh, Lim Ai Teng, Judith Wang, Melanie Wee, Jonathan Chou and Angeline Soh